mining or land brokerage companies prevented from bidding on Federal coal land simply because they owned properties adjacent to those which they might wish to lease. It still makes no sense when the principle is applied to railroads. Frankly, I think that a long time ago the Congress was sold a bill of goods when the mining companies promoted the adoption of Section 2(c). The mistake ought to be rectified by adopting the recommendations of the Public Land Law Review Commission, an agency which the Congress itself created and financed to inquire this, among other problems. [Whereupon, at 12:25 p.m., the subcommittee adjourned, to reconvene at 9:45 a.m., Thursday, November 13, 1975.] [Additional information for the record follows:] MINES AND MINING REPEAL OF SECTION 2(c) MR. RICHARD N. LITTLE, Vice President, Union Pacific Railroad, DECEMBER 15, 1975. DEAR MR. LITTLE: The Subcommittee on Mines and Mining which I chair, has recently concluded a series of hearings regarding the proposed repeal of Section 2(c) of the Mineral Lands Leasing Act of 1920. On November 11, Mr. Starr Thomas, Vice-President (Law) of Santa Fe Industries testified on this subject. At that time, the Subcommittee asked a number of questions, answers to which are to be submitted for inclusion in the record. Because of our desire to learn, as nearly as possible, the full implications of any changes in Section 2(c), it would be most helpful if you could supply similar information regarding the situation of your company. Accordingly, I am enclosing a list of questions which are being propounded to the Santa Fe and other western railroads, in hopes that you can submit answers which can be included in the record of our hearings. Chairwoman, House Subcommittee on Mines and Mining, DEAR MADAM CHAIRWOMAN: Your letter of December 15, 1975 concerning the proposed repeal of Section 2(c) of the Mineral Leasing Act of 1920 has been referred to me as President of Rocky Mountain Energy Company. Rocky Mountain is a subsidiary of the Union Pacific Corporation, which has responsibility for the development and evaluation of the coal resources of the Corporation and its subsidiaries. I have been able to develop the following information on the matters raised by your questions which relate to the particular situation of the Santa Fe and so are not in all respects applicable to Union Pacific. I nonetheless believe that this information is responsive to the thrust of the questions insofar as they relate to the impact of Section 2(c) on Rocky Mountain. Under the railroad land grant statutes, the corporate predecessor of Union Pacific Railroad Company was granted alternating sections of land, each section one mile square, along its right-of-way. The grant of alternating sections resulted in a checkerboard pattern of ownership in which each section of granted land was surrounded by land retained by the federal government. At present, a subsidiary of the Union Pacific Corporation holds mineral rights to approximately 4.5 million acres of such checkerboard lands which are located in regions thought to contain coal deposits. About 3 million of these acres are in Wyoming, and the rest are in Colorado and Utah. While it would be an enormous task to determine and tabulate the present ownership of all the surrounding adjacent lands, it is clear that at least in Wyoming, where the major deposits are located, such lands are still owned principally by the federal government. We are unable to provide any reliable estimate as to how much of the coal in these checkerboard lands is "economically developable". This determination depends among other things on the progress of coal mining technology, and on movements in long-term price and demand in the coal market. The vast majority of our coal is underground coal which can be mined only by constructing underground mines. Substantial portions of the reserves are so deep that a new technology will be required to mine them at all. In addition, in some areas there has not been sufficient geological exploration to make reliable estimates as to whether the lands are in fact coal-bearing or as to the costs and technological feasibility of development. In the case of those lands which are or may become economically developable, the impact of Section 2(c) relates to the need for mining to be conducted on a broader scale than on a single section of the checkerboard. The technological limitations on underground mining are increased and expanded by the checkerboard ownership pattern. As underground mine confined to a single section results in overhead costs per unit of coal recovered that are either prohibitive or, even assuming adequate technology and a high enough price of coal, unreasonably inefficient in economic terms. This economic inefficiency is compounded by an unjustifiable waste of coal resources which results from the obligation of miners on a single section to leave a barrier pillar or wall of coal beneath the perimeter of the section thick enough to provide support for both the surface and the coal seam on adjoining lands. Thus, mining on a section by section basis, even if it should be technologically feasible in some areas, requires that a great deal of otherwise mineable coal be left behind and is, therefore, highly incompatible with sound conservation practice. Accordingly, any large scale development of the coal in the checkerboard lands described above must be accomplished through common mining of the Union Pacific and adjacent federal lands. Over the years, Section 2(c) has delayed and impeded efforts to mine the coal in the Union Pacific checkerboard lands in common with the interspersed federal lands. This has been so even though, as the record of current leases and joint ventures demonstrate, we have always stood ready to enter into a variety of possible arrangements with lessees of the federal lands, and will continue to do so in the event Section 2(c) is repealed. We favor repeal of the Section because of its negative impact on the only efficient and conservationally sound method of developing the coal in the checkerboard lands described above and because, as the Public Land Law Review Commission found, the Section does not now provide any substantial public benefit. As the Commission said, "the fears of monopolistic control which led to the enactment of the existing restrictions" are no longer applicable. After any repeal, the antitrust laws, the transportation regulatory laws, the acreage restrictions, and the economic and technical limitations on the scale of coal mining activities our company could undertake will not only protect the public but will significantly restrict our ability to compete with the entrenched major coal companies who now dominate the coal market. Sincerely yours, Hon. PATSY T. MINK, JAMES C. WILSON, President. SANTA FE INDUSTRIES, INC., House of Representatives, 2338 Rayburn House Office Building, DEAR CONGRESSWOMAN MINK: Santa Fe Industries, Inc. is pleased to submit this response to your request for certain information set forth in the letter of December 8, 1975 to Mr. Starr Thomas, Vice President-Law of Santa Fe Industries, Inc., from Mr. Stanley Sloss of your subcommittee staff in connection with your consideration of repeal of Section 2(c) of the Mineral Leasing Act of 1920. Much of the information requested is simply not available, particularly precise acreage figures as to various ownerships adjacent to Santa Fe Pacific Railroad Company's ("Santa Fe Pacific") coal and the tonnage of "economically developable" coal reserves owned by Santa Fe Pacific and the Federal Government. We have made a diligent effort to obtain such information from the Department of the Interior, but without success, for the reasons detailed below. Nevertheless, we are providing such relevant general information as is available with the hope that you may find it useful for whatever purposes you may have in mind. Question 1. How many acres of land holdings (either in fee or in terms of mineral interests) of Santa Fe and of Cherokee and Pittsburg Coal interface with Federal lands? (Please answer State-by-State). Answer. As Mr. Thomas testified before the Subcommittee on Mines and Mining on November 6, 1975, Santa Fe Pacific's land and mineral ownership is almost exclusively the residue of the original railroad grant lands, most of which has been disposed of. Santa Fe Pacific currently holds fee title to 154,517 acres of original grant lands and has reserved mineral rights in 3,986,625 acres of original grant lands. These lands and reserved mineral interests are located exclusively ir Arizona and New Mexico, as follows: Land ownership in Arizona and New Mexico is broken down into four principal categories: the Federal Government; various Indian tribes, but primarily the Navajo; the State; and private land owners such as Santa Fe Pacific. Sante Fe Pacific lands and mineral interests are located exclusively in six Arizona counties and seven New Mexico counties and are intermingled with the other ownerships as follows: 1 Source: Valley National Bank, Phoenix, Ariz.; Santa Fe Pacfic RR. Co. We cannot determine the precise extent to which Santa Fe Pacific lands and reserved mineral interests "interface with Federal lands." We have contacted the Bureau of Land Management and the United States Geological Survey in an attempt to make a rough approximation, but without success. It would be necessary to review BLM tract books and local ownership records in the various counties to even begin to provide an answer to this inquiry. We are informed that BLM has recently initiated a project to gather this kind of information in New Mexico but that it will not be completed for four or five years. Cherokee and Pittsburg Coal & Mining Company owns widely scattered holdings in Colorado, Kansas, and New Mexico, as follows: In light of the nature of Cherokee's holdings and our experience in New Mexico, supra, we have made no effort to ascertain the extent or location of federal land ownership in Kansas and Colorado. Question 2. What total revenue was received by the Santa Fe from sales of the surface rights of the 4 million acres of land grants lands to which the railroad currently holds only mineral interests? Answer. Our records indicate that Santa Fe Pacific and its predecessor in interest, the Atlantic and Pacific Railroad Company, have received an average net profit (receipts over disbursements) of $1.46 per acre for all of the original grant lands that have been disposed of. Question 3. What is the precise acreage of Santa Fe coal interests which cannot be developed solely because of the existence of Section 2(c). (Please answer state-by-state). Answer. Section 2(c) prohibits "a company or corporation operating a common carrier railroad" from obtaining a federal coal lease "other than for its own use for railroad purposes". The full scope of this prohibition remains uncertain since the section has never been the subject of judicial interpretation. As Mr. Thomas pointed out in his testimony before your subcommittee, The Atchison, Topeka and Santa Fe Railway Company, the common carrier railroad subsidiary of Santa Fe Industries, Inc., neither owns any coal nor seeks to enter into coal development by obtaining federal coal leases or entering into joint ventures with coal lessees. Coal development is undertaken only by either Santa Fe Pacific Railroad Company (which, despite its corporate title, does not own or operate a common carrier railroad) or Cherokee and Pittsburg Coal and Mining Company. While Santa Fe Industries, Inc. does not believe that the bar of 2(c) extends to its two coal affiliates, I am certain that you recognize, as an attorney, that there is at least a plausible argument that it might. Of course, even if 2(c) were given the very broadest interpretation, it does not, in itself, prevent the piecemeal development of Santa Fe Pacific coal reserves. What it would accomplish is to frustrate the most economically efficient and environmentally sound development of much of Santa Fe Pacific's coal which is intermingled with or adjacent to federal coal, for the reasons which have led both the Senate and House versions of the coal leasing bills to provide authority for the establishment of "logical mining units" by the Secretary of the Interior. The magnitude of Santa Fe Pacific's coal that might be affected by 2(c) cannot be ascertained because of (1) the several legal uncertainties about the scope of 2(c), (2) the lack of information as to federal land or mineral ownership in the vicinity of Santa Fe Pacific's known coal bearing areas, as explained in the answer to Question 1, (3) the general lack of information on Santa Fe Pacific's part as to the total extent and quality of its coal resources, as explained in our answer to Question 6, and (4) a similar lack of knowledge on the part of the Interior Department concerning federal coal reserves in Arizona and New Mexico. Question 4. As to the 4 million acres for which Santa Fe holds only the mineral rights, who are the adjoining landowners? Please specify in terms of the adjoining acreage held by the Federal government, a State, one or more Indian tribes, and private individuals (please tabulate on a state-by-state basis). Answer. See answer to Question 1. Question 5. How much of the adjoining Federal land is coalbearing? To what extent (in terms of estimated tons of coal resources) is coal on these lands likely to remain undeveloped in the absence of repeal of Section 2(c) because the coal resources themselves do not justify development although they might be worth developing in conjunction with Santa Fe coal lands? Answer. The extent of federal land ownership in Arizona and New Mexico is set out in our answer to Question 1. However, Santa Fe Pacific has been unable to ascertain from available information or from the Interior Department how much federal land in Arizona and New Mexico is coal bearing. Hearings on the federal coal leasing program conducted by Senator Metcalf in the Spring of 1974 elicited certain general information from the BLM as to the extent of federal coal reserves in New Mexico as of 1973. It showed that there were 28 outstanding federal leases encompassing 41,000 acres, of which 26,197 acres were retained mineral rights where the surface had been disposed of. It was estimated that those 28 federal leases contained 402 million tons of recoverable coal reserves, of which only 124 million tons were classified as "committed" to development. Among the reasons given as to why some 278 million tons remained in the "uncommitted" category are "size of least unit", "location" and "ownership". Santa Fe Pacific has not been able to ascertain the extent to which these reasons may relate to federal coal intermingled with or adjacent to coal owned by Santa Fe Pacfic, nor correspondingly, whether repeal of 2(c) would facilitate development of that federal coal. In addition to the federal coal included within the 28 outstanding federal leases, there are an additional 76,000 acres of presumably coal bearing lands covered by outstanding prospecting permits or pending lease applications. We would expect that a comparable portion of the coal reserves covered by those instruments would be subject to the constraints on development experienced under existing leases. Here again Santa Fe Pacific cannot estimate the extent to which repeal of 2(c) might remove some of those constraints. The BLM apparently does not have comparable information for Arizona. Question 6. Please estimate the extent to which the Santa Fe's holdings, in fee or of mineral interests, are devoid of economically developable coal resources. Answer. As Mr. Thomas testified before your subcommittee, Santa Fe Railway had been engaged in coal development since shortly before the turn of the century, primarily to provide coal for its steam locomotives and for other railroad purposes. Hearings on Federal Coal Leasing Program before the Subcommittee on Minerals, Materials and Fuels of the Senate Committee on Interior and Insular Affairs, 93d Cong., 2d Sess. (1974). • Id. at 100-101. Id. at 94, 99. |